Mortgage Rates Soar, Could Sink in Next Report

Rates

An expected surge in mortgage rates came to fruition this week. The latest forecast has fixed rates tumbling in next week’s report. A new index for adjustable-rate mortgages moved lower.

A stunning 19-basis-point surge from the preceding week left average 30-year fixed rates at 4.90 percent in Freddie Mac’s Primary Mortgage Market Survey for the seven-day period that concluded on Oct. 11.

Historical data from the secondary mortgage lender indicate that long-term fixed rates have not been that high since the
week ended April 14, 2011, when the average was also 4.91 percent.

Compared to the same week a year ago, average 30-year rate have soared 99 BPS.

A Mortgage Daily analysis of Treasury market activity suggests that fixed mortgage rates could be around 8 BPS lower in Freddie’s survey next week. However, significant stock market volatility this week could change that outlook.

But a plurality of panelists surveyed by Bankrate.com for the week Oct. 10 to Oct. 16 predicted mortgage rates will rise at least 3 BPS over the next week. A third expected no change, and only a quarter agreed with Mortgage Daily’s forecast and projected a decline.

Interest rates on jumbo mortgages were
20 BPS more than conforming rates in the U.S. Mortgage Market Index report from Mortgage Daily and OpenClose for the week ended Oct. 5. The spread widened from 16 BPS a week earlier.

Fifteen-year fixed rates averaged
4.29 percent in Freddie’s survey, jumping 14 BPS from the week ended Oct. 4. Rates on 15-year loans were 61 BPS lower than 30-year rates. The spread ballooned from 56 BPS a week previous.

Freddie reported that five-year, Treasury-indexed, hybrid adjustable-rate mortgages averaged 4.07 percent, 6 BPS worse than last week.

Rate adjustments on hybrid ARMs are based on the yield of the one-year Treasury note, which the Department of the Treasury reported closed at 2.66 percent Thursday, rising 3 BPS from the preceding Thursday.

Also serving as an ARM index is the six-month London Interbank Offered Rate, which the Wall Street Journal reported at 2.63625 percent as of Wednesday, up from 2.60888 percent seven days earlier.

LIBOR’s heir apparent, the
Secured Overnight Financing Rate, fell to 2.15 percent Wednesday from 2.20 percent the previous Wednesday, the Federal Reserve Bank of New York reported.

ARM share in the latest Mortgage Market Index report was 17.8 percent, thinning from 18.7 percent the prior week.

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